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The market's favorite recession indicator has been wrong twice since 1950. Here's why some investors say it's flashing a false positive again.

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Even if a recession does follow this particular inversion, it doesn't necessarily mean that the recession is right around the corner.

A yield-curve inversion has preceded every US recession since 1950. But not every instance of inversion was followed by a recession. In fact, the popular signal — which flashes when the two-year Treasury yield tops the 10-year — has been wrong on at least two occasions since 1950. Some investors think the current yield curve inversion could be yet another false-positive. If the Federal Reserve keeps easing monetary conditions and a trade resolution is reached, it could un-invert.

A yield-curve inversion has preceded every US recession since 1950. But not every instance of inversion was followed by a recession. In fact, the popular signal — which flashes when the two-year Treasury yield tops the 10-year — has been wrong on at least two occasions since 1950. Some investors think the current yield curve inversion could be yet another false-positive. If the Federal Reserve keeps easing monetary conditions and a trade resolution is reached, it could un-invert.

 

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